Negotiation Hopes Rise but Hormuz Risk Keeps Markets Cautious

Recent reports suggesting that both sides are preparing for negotiations are partly correct, but the latest updates show the situation is still very uncertain. The US has delayed strikes on Iran’s energy infrastructure for about 10 days to allow talks more time, yet Iran continues to deny direct negotiations, and military activity has not stopped.

At the same time, the biggest issue for markets remains the Strait of Hormuz. Shipping through the route is still heavily disrupted, with attacks on vessels and tanker traffic dropping sharply, affecting around 20% of global oil supply.

Because of this:

• oil prices remain supported

• inflation risks stay elevated globally

• the US dollar continues to get support from energy uncertainty

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There is strong international pressure to avoid a prolonged conflict because a longer disruption could create a major global energy crisis. However, military strikes are still ongoing and both sides are showing strength publicly while talks remain unclear.

In short

• Negotiations are being discussed but no confirmed deal yet

• Military activity is still continuing

• Strait of Hormuz disruption remains the key market risk

• Oil is likely to stay supported while shipping risk continues

• The dollar stays supported because energy uncertainty remains high